Letters | Why China can’t achieve goal of ‘common prosperity’ using the Nordic model

Readers discuss why China must count on a market-driven approach to narrow its income gap, and react to two of the government’s efforts to rein in hypercompetition in education – the crackdown on private tutoring and a ban on exams for first-graders

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A farmer loads rice onto a carrier in Shanshu village in central China’s Hunan province on August 29. More needs to be done to improve rural livelihoods. Photo: Xinhua

Published: 12:30am, 3 Sep 2021

“We can allow some people to get rich first and then guide and help others to get rich together,” Chinese President Xi Jinping said at the meeting of the Communist Party’s Central Committee for Financial and Economic Affairs in mid-August, which agreed on the goal of “common prosperity”.

Emphasising “third distribution”, the government hopes to create opportunities for rich private companies to give back to society and donate to the poor. Secondary income distribution measures, like taxes, social welfare and crackdowns on “illicit income”, will also be enhanced.

In fact, the gap between the rich and poor has long been an important topic of study in China, a country with a far from ideal Gini coefficient. At the same time, China has leveraged its demographic dividend to achieve economic miracles over the past decades.

As declared by Xi at the Communist Party’s 100th anniversary celebration, extreme poverty has been eliminated and the country is now a “moderately prosperous society”. Thus, it is time the government considered how to further mitigate income disparity, which is a huge stress on social harmony. A more egalitarian society would enhance social and thus political stability, but how to effectively achieve this in the long run is the challenge.

In Nordic countries, where people enjoy sizeable social welfare benefits, such as free education and equitable medical care, there are relatively high tax rates and public spending. These act as an active wealth distributor; welfare systems in these countries are mainly funded by tax revenue.

While many put a positive spin on the Nordic model, saying it could be a role model for China, they have overlooked the fact that the problem of income inequality is much more severe in China, with a huge proportion of people in the low-income group. People at the top fifth of Chinese households enjoy a disposable income more than 10 times that of those in the bottom fifth, and the difference is especially large between cities and rural areas.